Typically, it’s taken two quarters of negative GDP growth to officially mark a recession. By the time that’s announced, some short or shallow recessions are already over. We’ve seen two negative quarters so far this year, but many are looking to change the definition given the strong job market and other factors.
As the definition of a recession seems to be changing, it might be a good idea to rethink the idea of a recession-resistant company.
Those are typically firms that engage in safe, highly-regulated sectors. But some companies that aren’t in heavily regulated industries seem to perform well no matter how the economy is doing.
One such area is in video games. Publishers have built up an industry larger than the film industry, and one that benefitted from pandemic lockdowns. That space will continue to attract money from consumers, even in a slow economy.
Action to take: Electronic Arts (EA) is about to become the largest pure-play developer following Activision-Blizzard’s (ATVI) by Microsoft (MSFT). The company’s vast array of titles, including sports titles, makes it look like a strong performer.
Shares are down with the overall market in the past year, but trading at 18 times earnings, prices look reasonable on a further pullback in stocks in the coming weeks. Buyers can get a 0.6 percent starting dividend here.
For traders, the January $140 calls, last going for about $4.00, can deliver mid-double-digit returns. Traders may want to buy on a down day for shares, and flip for a quicker profit.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.